Finance Brief: Freddie Mac to Request $312 Million from U.S. Treasury After $3.3 Billion Loss

Top Stories

  • Freddie Mac reported a net loss of $3.3 billion for the fourth quarter of 2017, meaning it plans to request $312 million from the U.S. Treasury. The loss, which follows a shortfall reported earlier this week by Fannie Mae, was spurred by a write-down of Freddie Mac’s tax-deferred assets stemming from the tax law that took effect in December. (Washington Examiner)
  • The Securities and Exchange Commission denied a Chinese-owned company’s attempt to acquire the Chicago Stock Exchange for $20 million, citing what it characterized as low transparency surrounding details of the transaction regarding who would be in control of the exchange. The SEC’s decision to block the deal, through which a subsidiary of Chongqing Casin Enterprise Group would have bought the Chicago exchange, was welcomed by lawmakers on Capitol Hill who were skeptical of the proposal. (The New York Times)
  • The main securities regulator in Massachusetts accused Scottrade Inc., a subsidiary of TD Ameritrade Holding Corp., of violating the federal fiduciary rule aimed at preventing conflicts of interest in the retirement advice sector. Massachusetts filed a formal complaint requesting a cease-and-desist order and an administrative fine for Scotttrade, which they accused of holding sales contests that violated the rule after the regulation’s partial implementation in June. (The Wall Street Journal)

Chart Review

Events Calendar (All Times Local)

Economic Club of Washington event with Bank of America’s Moynihan 11 a.m.
Healthcare Leadership Council event on blockchain 12 p.m.

New Report: How Americans & Investors Are Reacting To Market Volatility

Recent tumult in the stock market has triggered a wave of concerns about investor confidence and the possibility of sustained downturn. To provide a better understanding of the real-time reaction to this volatility, Morning Consult conducted a comprehensive survey of both consumers and market investors. See the full report.


Senate Finance approves two trade nominees
Vicki Needham, The Hill

The Senate Finance Committee on Thursday approved two of President Trump’s delayed trade nominees. The panel sent C.J. Mahoney and Dennis Shea, both nominated for deputy U.S. Trade Representative jobs, to the Senate floor for consideration.

The CFPB’s Declaration of Dependence
Jesse Eisinger, ProPublica

In early February, the Federal Reserve delivered its most significant punishment of a major bank in a generation, sanctioning Wells Fargo for its pattern of customer exploitation. A few blocks away, meanwhile, another of the giant bank’s regulators, the Consumer Financial Protection Bureau, has recently displayed a different attitude: It has been softening on scandal-inundated Wells Fargo.

Equities Power Higher as Treasury Yields Decline: Markets Wrap
Robert Brand, Bloomberg

Stocks in Europe extended the rally in global equities following a muted session in Asia due to holiday closures. Futures on the S&P 500 Index gained 0.3 percent.


B of A’s Moynihan: Big banks are ‘fine’ with Dodd-Frank
Ian McKendry, American Banker

While small and regional banks are pushing for a rollback of the Dodd-Frank Act, big banks are largely supportive of the 2010 financial reform law, Bank of America CEO Brian Moynihan said Thursday. “Dodd-Frank is fine,” Moynihan said at the Economic Club of Washington.

Latvian Bank Pushes Back Against U.S. Allegations
Samuel Rubenfeld, The Wall Street Journal

A Latvian bank denied some of the allegations lodged against it by the U.S., and said it is working with U.S. authorities to address their concerns. The U.S. Treasury Department earlier this week accused Riga, Latvia-based ABLV Bank of laundering billions of dollars in illicit funds.

Financial Products and Investments

S.E.C. Blocks Chinese Takeover of Chicago Stock Exchange
Emily Flitter, The New York Times

A federal securities regulator on Thursday struck down the proposed $20 million acquisition of a Chicago-based trading hub, the Chicago Stock Exchange, by a Chinese-owned company. The Securities and Exchange Commission said it blocked the deal because of a lack of transparency in the details, including an inability to identify who exactly would control the exchange.

Massachusetts Accuses Scottrade of Fiduciary Rule Violations
Lisa Beilfuss, The Wall Street Journal

Massachusetts’ top securities regulator has accused discount brokerage firm Scottrade Inc. of violating the U.S. Labor Department’s fiduciary rule, the latest example of states stepping in as the federal government rethinks the retirement-savings regulation. Scottrade, now a unit of TD Ameritrade Holding Corp., “knowingly violated the firm’s impartial conduct standard” by holding at least two sales contests that affected retirement assets after the fiduciary rule went into partial effect June 9, 2017, Secretary of the Commonwealth William Galvin said Thursday.

MetLife’s Misplaced-Pensioner Issue Sparks New State Queries
By Katherine Chiglinsky and Neil Weinberg, Bloomberg

MetLife Inc. provided new details this week about how it lost track of thousands of pension clients. But state and federal inquiries promise to drag on for months and will make it hard to put the scandal behind it any time soon.

China 2017 Holdings of U.S. Treasuries Rise Most in Seven Years
Sarah McGregor, Bloomberg

China increased its holdings of U.S. Treasuries last year by the most since 2010, in a signal its demand for American debt remains resilient. The value of China’s holdings of U.S. bonds, notes and bills rose by $126.5 billion to $1.18 trillion in December from a year earlier, according to Treasury Department data released Thursday in Washington.

Housing and GSEs

Freddie Mac joins Fannie Mae in needing federal funds because of accounting losses
Joseph Lawler, Washington Examiner

Freddie Mac joined Fannie Mae Thursday morning in announcing that it would need funds from the Treasury thanks to accounting losses prompted by the new tax law. The bailed-out government-sponsored enterprise told investors that it lost $3.3 billion in the fourth quarter of 2017, driven by a $5.4 billion in accounting losses due to the tax changes signed by President Trump in December.


Bank of America CEO Brian Moynihan: Tax cut was ‘right thing’ for U.S.
Nathan Bomey, USA Today

Bank of America CEO Brian Moynihan hailed President Trump’s tax cut and didn’t sound concerned about inflation in a live interview Thursday. Moynihan told interviewer David Rubenstein at the Economic Club of Washington, D.C., that tax reform was “the right thing for the United States.”

Financial Technology

Investors Warned of Cryptocurrency ‘Pump-and-Dump’ Schemes
Gabriel T. Rubin, The Wall Street Journal

Regulators on Thursday warned consumers to beware of “pump-and-dump” manipulation schemes in virtual-currency markets as they try to rein in misconduct on unregulated spot exchanges. The guidance from the Commodity Futures Trading Commission targets schemes that rely on coordinated efforts to create phony demand for cryptocurrencies, followed by schemers quickly selling their stakes to take advantage of the inflated prices.

CFTC chair: ‘federal framework’ may be needed to regulate cryptocurrencies
Barney Jopson, Financial Times

A top US financial regulator has said cryptocurrencies such as Bitcoin may warrant the creation of a new federal oversight regime to replace an existing patchwork of state regulations. Chris Giancarlo, chairman of the Commodity Futures Trading Commission, told a Senate hearing that “a rationalised federal framework may be more effective and efficient in ensuring the integrity of the underlying market” in virtual currencies.

Coinbase is erratically overcharging some users and emptying their bank accounts
Adrianne Jeffries, The Verge

A growing number of Coinbase customers are complaining that the cryptocurrency exchange withdrew unauthorized money out of their accounts. In some cases, this drained their linked bank accounts below zero, resulting in overdraft charges.

Hackers stole $6 million from Russian bank via SWIFT system: central bank
Jack Stubbs, Reuters

Unknown hackers stole 339.5 million roubles ($6 million) from a Russian bank last year in an attack using the SWIFT international payments messaging system, the Russian central bank said on Friday. The disclosure, buried at the bottom of a central bank report on digital thefts in the Russian banking sector, is the latest in a string of attempted and successful cyber heists using fraudulent wire-transfer requests.

Opinions, Editorials and Perspectives

Congress Should Correct CFPB’s Willful Ignorance on Payday Lending
Rep. Dennis A. Ross, Morning Consult

Since Acting Director Mick Mulvaney announced his decision to review the Consumer Financial Protection Bureau’s payday lending rule, detractors have demanded that he explain himself. Fortunately, the flimsy research underpinning the rule in the first place reveals that no explanation is needed.

Another Plea From Fannie Mae
The Editorial Board, The Wall Street Journal

Fannie Mae is again going hat in hand to taxpayers after announcing a $6.5 billion quarterly loss on Wednesday. Washington should take this news as a kick in the keister to finally start winding down the mortgage giant and its busted brother, Freddie Mac.

Goldman Sachs and rivals home in on risky consumer banking
Ben McLannahan, Financial Times

Lloyd Blankfein was a breezy opening act at a big industry event this week in Key Biscayne, Florida. On stage at the Ritz-Carlton the chairman and chief executive of Goldman Sachs was talking about Marcus, the bank’s new online savings and lending platform, which is targeting borrowers with scores as low as 660 on the 300-850 Fico scale.

Research Reports

Federal Deposit Insurance Corporation Funds’ 2017 and 2016 Financial Statements
Government Accountability Office

GAO found the financial statements of the Deposit Insurance Fund (DIF) and of the Federal Savings and Loan Insurance Corporation (FSLIC) Resolution Fund (FRF) as of and for the years ended December 31, 2017, and 2016, are presented fairly, in all material respects, in accordance with U.S. generally accepted accounting principles. The Federal Deposit Insurance Corporation (FDIC) maintained, in all material respects, effective internal control over financial reporting relevant to the DIF and to the FRF as of December 31, 2017.